More needs to be done tackle “greenhushing” and “green-bleaching”

Huge sums of money flow into funds that exaggerate companies’ ESG (environmental, social, and governance) credentials. However, the International Organisation of Securities Commissions (IOSCO), a global collective of securities regulators, has pointed out that other related malpractices are making such greenwashing even worse.

The survey, conducted among IOSCO members and released during the recent COP28 U.N. climate summit in UAE, illustrated that most jurisdictions lack legally binding provisions to specifically define greenwashing. Despite this, some regulators are already imposing fines on firms for engaging in greenwashing activities. 

“While authorities have made efforts to adapt their supervisory practices and enforcement regimes to prevent and address greenwashing, it is still necessary to fully test the adequacy and effectiveness of these mechanisms,” IOSCO stated.

Regulators are up against missing data sets, doubts concerning the standard of ratings issued to corporate ESG profiles, and inconsistency surrounding the tagging of funds that undermine investor protections, the IOSCO said.

“While some of these challenges are currently being addressed, greenwashing remains a fundamental market conduct concern that poses risks to both investor protection and market integrity.”

“Countering these risks is not an easy task given that greenwashing can take different forms and can vary in scope and severity,” the IOSCO explained.

“Greenhushing” and “green-bleaching” are among other shady practices that are arising with increased frequency. The former pertains to businesses staying quiet on the reporting of their sustainability credentials in order to avoid investor questions. Meanwhile, green-bleaching is the term given to describe managers understating the sustainability credentials of their funding to get around further regulatory obligations.

“None of the survey respondents has specific frameworks to regulate these concepts,” IOSCO said. 

The IOSCO has since said that greenwashing could be dealt with more effectively through new rules to help regulate ESG ratings, combined with climate-based disclosures at EU and international level.

Know the risks

It weighs upon organisations of all sizes to prioritise ESG initiatives and promote healthy business practices. But the integrity of our efforts is under threat from malpractice and poor governance.

Get to the heart of the issues only at #RISK Digital this February, where experts will shed light on what genuine sustainability looks like.